Given track records, it should be T-Mobile trying to buy Sprint

This article may contain personal views and opinion from the author.
Given track records, it should be T-Mobile trying to buy Sprint
As someone who has lived and worked around the wireless industry for the better part of two decades, I like taking a cynic’s point of view when large mergers between carriers are announced. Years ago it was not as interesting because there was only one “real” national carrier back in the 1980s and 1990s, AT&T Wireless (formerly McCaw Cellular).

The rest of the landscape was a bunch of smaller carriers. There were larger regional carriers that had agreements to enable national service, like GTE, ALLTEL, AirTouch, Telecorp, Tritel, and US Cellular. Sprint had smaller operations before it built out its PCS spectrum.

The late 1990s brought rapid consolidation of the wireless sector in the US, BellSouth and SBC (who formed Cingular) bought AT&T Wireless forming the Cingular brand. Bell Atlantic, GTE, AirTouch, and PrimeCo merged to create Verizon and Verizon Wireless. Sprint would buy smaller carriers like 360 Communications, US Unwired and later Nextel.

Deutsche Telekom would lead the fray to create the T-Mobile brand in the US by acquiring VoiceStream, Omnipoint, Aerial, Powertel and SunCom assets, creating the fourth largest carrier in the US.

Leftovers


Sprint and T-Mobile have essentially been fighting over leftovers from Verizon and AT&T for several years. Only until recently, both carriers seemed to be in a permanent death spiral of subscriber losses. T-Mobile was finally able to reverse that trend by introducing truly radical changes in the way it does business and the rest of the industry has literally been playing catch-up ever since. It makes me scratch my head as to why Deutsche Telekom would be so eager to want to sell off what may be its only growth market.

Sprint, on the other hand, has not been as fortunate on the subscriber front, but it does have an eager and willing new owner in Masyoshi Son, founder of SoftBank in Japan. SoftBank’s 80% acquisition of Sprint just closed less than six months ago. The new company has not even had a chance to implement a strategy to disrupt the market.

In 2004, Sprint made the move to buy Nextel for $36 billion. The idea was that Sprint would find a way to merge the incompatible CDMA and iDEN wireless technologies, enabling push-to-talk connectivity no matter what and enhancing spectrum holdings in several markets. We know how that story ended, earlier this year, what was left of the Nextel network was shut down so the spectrum could be farmed for use on Sprints main services. Then there was the formation of Clearwire and the rush to bring “4G” to the market via WiMAX.

Three Words and One Word


Let us pretend for a moment that a merger between Sprint and T-Mobile is inevitable and the totally incompatible networks are not an issue. Given the track record between the two companies, who is better off running the show? Sprint’s CEO Dan Hesse has done a fine job of stemming the bleeding from Sprint given the difficult circumstances the carrier put itself in, but facts are facts, Sprint is not in a position to lead in any dance. Don’t believe me? I have three words for you: Nextel, Clearwire and WiMAX.

T-Mobile, by contrast, has been quite a bit more nimble and far more wise in its decision making process. Granted, the carrier remains smaller, but CEO John Legere in the 14 months he has been in that position, has almost literally turned the tables not just for itself, but for the entire industry in the United States. Sprint has no such claim, not by a long shot.

If I were Masayoshi Son, I would be quite concerned about forking over $20 billion more after digging out $20 billion just to get in the game in the first place. He should look not only at the effect the debt burden Sprint was carrying, but he should look very carefully at Sprint’s perfect track record of failure when it comes to working through incompatible network platforms. Nextel was a bust. Clearwire was a bust. WiMAX was a bust. Since I’m on a roll here, I’ll point out that the LightSquared deal was a bust too – granted, that one wasn’t really Sprint’s fault, but it shows an inability to pick a winner.

Forgive me for being a cynic, but a potential Sprint acquisition of T-Mobile looks like it could only have one outcome: disaster.

Track Records


I am not saying that T-Mobile should try and finance a deal to buy Sprint, but that idea gets me far more excited than what the news seems to be saying today. When T-Mobile took over MetroPCS it laid down the law, “We are not going to merge anything, Metro subscribers will get handsets that work on T-Mobile’s network and once the MetroPCS deck is clear, we’re shutting down the network and converting the spectrum to GSM/UMTS/HSPA/LTE as we see fit.” Yes, that is a paraphrase, but wholly accurate.

T-Mobile was also able to make the most of a difficult playing field, yes the AT&T break-up fee helped it, but in the grand scheme it was not a dump truck of goodies. It was $3 billion in cash, some spectrum and roaming agreements. No one can deny, 2013 was T-Mobile’s year.

The problem with Sprint taking on such an audacious plan is not the act of the merger itself, but the talent that would be running the show behind the scenes, and that should worry people, since it is perfectly reasonable to expect that mindset and talent pool still exists to some extent within Sprint. When the skeletons of Nextel, Clearwire and the flawed rollout of WiMAX are not even hiding in a closet, Masayoshi Son might want to take a moment to reflect on that and gauge if the money and time is well spent.

It's How You Use It


Sprint has plenty of radio spectrum in its portfolio to compete. The problem is that it is currently scattered across not one (CDMA), not two (LTE), not three (WiMAX), not four (TDD-LTE), but five (iDEN) different radio standards (including decommissioned networks like Nextel). So, somehow, someone, somewhere within Sprint thinks it’s a good idea to add to that headache of bringing in T-Mobile and its incompatible network (GSM/UMTS) to the table?

If Son wants to see an early return on his investment, let SoftBank sell off some of its stake in Sprint, allow SoftBank be a 45% (or 49.9%) holder while T-Mobile takes over 55% (or 50.1%), not unlike the initial Verizon/Vodafone arrangement and bring John Legere’s dynamic leadership to the front of the line. If debt concerns and break-up fees are already causing consternation about a takeover of T-Mobile, then that means it is already time to push away from the table, call it a day, and get to work on Sprint’s new strategy.  Anything else is a distraction.

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42 Comments

38. gd761

Posts: 219; Member since: Sep 18, 2012

Since Sprint has More Spectrum than Both AT&T and Verizon Combined, Sprint Should Buy T-Mobile. With the Purchase of T-Mobile, Sprint can Re-Allocate the Spectrum from WiMax and IDEN right away and then use the GSM from T-Mobile and have Hybrid phones that can take advantage of CDMA, GSM, and LTE. When Sprint is ready, Sprint can then Shut off the CDMA Network and then Re-Allocate that as well into both GSM & LTE. Sprint can also use the Extra Spectrum Not only for Smart Phones but also for Tablets. Sprint can Use their HUGE Spectrum to Let Tablets Roam out into the world like Phones have been doing and Letting the Tablets have More than WiFi to be able to get online with. Sprint and Softbank are looking to Make BIG Changes. This can be one of the Changes that Sprint can take advantage of. What is Your Opinion on this Idea?

37. bwhiting

Posts: 188; Member since: Jun 15, 2013

I would say that it would be more beneficial for the T-Mobile takeover since they have more of a stable standing right now with the towers and also with what they can do. Sprint has been working on the towers for a while now but the CDMA towers are great for the people that use the phone over here due to what can be done with them over the GSM ones so if they can go to that form of towers that would be beneficial. The fact that it is a thought kinda makes me think what are they really thinking because it would not really work out at all for Sprint to get them right now when they are still working on the towers in the many areas that need it especially in the mid west.

31. CEMIII

Posts: 110; Member since: Jun 26, 2013

Well I must admit the article is spot on we shall see what happens. If T-mobile & Detuch realize how much staying power they have they could in fact step up and call the shots.

28. Jeradiah3

Posts: 1149; Member since: Feb 11, 2010

Yet again, this is why the Tmobile - AT&T merger would have been a better deal. Why would anyone merge with Sprint anyway?

20. sarge77

Posts: 202; Member since: Mar 14, 2013

Sprint could be good not sure why they're called sprint if it's taking forever to add new towers for 4g they should be called the chill network sorry if you want 4g but we're still chilling on 3g. can't wait for spark maybe i'll see it on 4th of july by 2020.

33. johnbftl

Posts: 283; Member since: Jun 09, 2012

Sprint is an acronym for Southern Pacific Railroad Internal Network Telecommunications. It's an antiquated name from their days as a landline company. Just like AT&T stands for American Telephone and Telegraph.

36. andynaija

Posts: 1268; Member since: Sep 08, 2012

Wow didn't know that. Learned something new today :D

19. mikelemon

Posts: 95; Member since: Nov 21, 2013

T-Mobiles parent company wants out of USA and that is why they are sell it. DT the parent company wanted out when then where going to sell to AT&T but DOJ didn't let them. So no it should not be t mobile buying sprint.

25. TheMan

Posts: 494; Member since: Sep 21, 2012

Bottom line, Sprint has been consistent in its inability to implement a successful strategy. T-Mobile hasn't been a world beater, but at least has been building on successive "wins" in recent years. Deutsche Telekom's situation has no bearing on whether TMO should or shouldn't buy Sprint. Like many (if not most) European telecom firms, DT profitability has been under siege. Selling TMO meant ready cash and allowed it to avoid having to compete in two difficult markets with limited resources.

26. mikelemon

Posts: 95; Member since: Nov 21, 2013

DT was losing hundreds of thousands of subs every year prior to no contract changes. DT was losing in the US market and had little interest in competing anymore. So they wanted to sell it. They couldn't sell it and they still want to because they still don't really have an interest in US anymore. So T mobile buying sprint is horrible move as DT has no motivation to do anymore than it has to move up. Softbank on the other hand is motivated to gain market share.

27. mikelemon

Posts: 95; Member since: Nov 21, 2013

Sorry T-Mobile USA was losing many subs.

15. cripton805

Posts: 1485; Member since: Mar 18, 2012

Why is wimax still on? Ditch it already. And why begin spark before their regular LTE!? I switched to ting and I save half of what I used to pay. Sometimes more for the same usage. Why would I pay more for the same service.

42. thunder18

Posts: 156; Member since: Aug 06, 2009

Because Sprint promised to keep the network up a certain amount of time to support users still in contract with WiMax phones. As a customer, how would you feel a month after purchasing your phone if the carrier told you your data was going to be shut off in, let's say a couple of months for the sake of it?

12. Slammer

Posts: 1515; Member since: Jun 03, 2010

It amazes me that with all the negativity towards Sprint and it's decisions, that people ignore the fact that Sprint is still been able to retain being the third largest carrier. No doubt Sprint's old management team has brought some descention to the carrier, however, Dan Hesse and his team had to shove ten pounds of crap into a five pound bag. This is NOT the same Sprint has years ago. Looking at AT&T which was desolved in the 90's to curb a monopolistic position, Verizon was a buzzard hovering for its remains. Since then, the FCC has coddled the two in a cartel of hharmonious matrimony to rebuild what was taken away. Like two children separated at birth. Sprint had to build from the ground up to achieve a position in the industry in which it has survived through all the rhetoric and manipulation of the wireless industry. It now sits on an enormous amount of spectral assets it has acquired from "Bad Decisions." Assest that can make Sprint a very powerful network. It is easy to dismiss Sprint as insignificant. But, it is more logical to look at what Sprint is capable of and what direction it is trying to accomplish under new management. John B.

18. QWIKSTRIKE

Posts: 1461; Member since: Mar 09, 2010

AT&T WAS DISSOVLVED IN THE 80'S I BELIEVE. In the 90's they bought Cellular One , and merged back together all of the dissolved parts into the entity that it is today. Verizon did the same, bought back all of the baby Bells to form the monopoly it is today.

22. Maxwell.R

Posts: 218; Member since: Sep 20, 2012

Sprint had incumbent network capacity before the PCS auctions. When Sprint bought a bunch of 1900MHz spectrum, many of the incumbent properties were sold. Sprint also bought several small incumbents. The PCS build-out was from the ground up, but that does not explain, excuse or build shareholder value when you look at the Nextel disaster, Clearwire disaster or WiMAX debacle.

29. Slammer

Posts: 1515; Member since: Jun 03, 2010

The Nextel fiasco was indeed a setback. However, moving forward as we look at the Clearwire partnership, Sprint had no choice to proceed with WiMAX. It was under pressure to utilize the spectrum allotment or forfeit the spectrum holdings. LTE was not yet ready and Sprint made the wise choice to move on WiMAX. Dan Hesse had referenced the fact that WiMAX was indeed a provision for early adoption with the idea to move to LTE. In short, Sprint had no choice and Clear was tanking. Clearwire had over 150 mhz of spectrum with no idealistic plan, motivation or financial support to carry through with a good buildout. It just so happened that Sprint and Clearwire had to join forces in spite of how people look at it. The wireless industry has not been very kind with the exception of supporting AT&T and Verizon through merge after merge. Acquisition after acquistion. It was refreshing to see the government kill the monopolization AT&T would once again gain through a T-Mobile USA swipe. This would've left Sprint open for a Verizon merge/acquistion. We need more competiton; not less. Sprint is on the right track and as I begin to see the network vision building in my area, the towers already restructured, have been noticeably improved. Building penetration, speed and quality is great. Scars take time to heal. Sprint is doing well in its healing process. John B.

41. Maxwell.R

Posts: 218; Member since: Sep 20, 2012

That is not accurate. Craig McCaw (founder of McCaw Cellular) led a group of investors to buy the entity that became Clearwire as we knew it back in 2004. Intel and Motorola dumped a bunch of money into the venture. Sprint didn't enter the picture with Clearwire until 2007. That partnership amounted to a spectrum swap and roaming agreement in an effort to expand Sprint's footprint. Sprint had already decided on WiMAX by then, and since Clearwire was on the same page, it was a relative match. Clearwire started with buckets of cash, and the IPO raised even more. Some of your points make sense on the face of it, but to say that Sprint had no choice rings hollow.

8. johnbftl

Posts: 283; Member since: Jun 09, 2012

Absolutely terrible article. For one, iDEN has been shut off and is been converted to 800 mHz LTE. 2, T-Mobile isn't going to purchase anyone. Deutsche Telecom has been trying to get out of the U.S. market for years. Lastly, there would be no issue with GSM conversion to CDMA because within the time frame it would take, everything will be converted to LTE. All networks have a timeframe to convert to VoLTE and dismantle GSM and CDMA networks for LTE spectrum. Even if no one buys T-Mobile in the 18 month vesting period, Metro is CDMA, which would be the same transition as if Sprint purchases T-Mobile.

10. a_merryman

Posts: 749; Member since: Dec 14, 2011

Yeah, it was an awful article, he says 5(!) (including decommissioned networks like nextel). But why would you include a decommissioned network and count the lte carrier that replaced it. They havent even been selling iden phones for a couple years. Oh, thats right...b/c the article doesn't even want to try seeming objective. I dont see how it would be any harder for Sprint to bring T-mobile into the fold than it would be for the reverse. Its not Like phones no-a-days cant fit a bunch of different bands in them. The Nexus 5 covers all of Sprint's and T-Mobile's bands after all. Technology isn't the same as when sprint bought nextel.

21. Maxwell.R

Posts: 218; Member since: Sep 20, 2012

Sprint's network "Vision" conversion will not be complete until some time next year, so iDEN resides as a "relic." You also have not paid attention to the T-Mo/Metro merger. Metro is not selling onto the CDMA network anymore an T-Mo is aggressively converting the customer base with T-Mobile network handsets for the purposes of converting the CDMA network to LTE/GSM/UMTS. The Clearwire conversion from WiMAX to LTE is going to take just as long, if not longer than the iDEN/Nextel network.

30. Johnabis

Posts: 69; Member since: Feb 17, 2011

sounds like someone is just being a hater to me...

40. ortiz44

Posts: 2; Member since: Mar 26, 2012

Sounds like you just lost your point

7. Johnabis

Posts: 69; Member since: Feb 17, 2011

in reference to you asking how sprint plans to use its spectrum.. sprint is using clearwire's spectrum (2500mhz) and nextels iden spectrum (800mhz). for its LTE triband spark network. how can you be so critical of sprint but then not even mention this?

4. frmrVZguy

Posts: 42; Member since: Mar 10, 2012

re " It makes me scratch my head.." Imagine the news headline: "German cellco spying on US customers" or "German cellco wins DOD & Gov't cell contract". This is headwind. re "T-Mobile... nimble ... wise" I would say 'patient'. They applied new tech where they could profit instead of tying to be a market-maker as Sprint did. It was timing. Sprint's vision was correct, timing was wrong. Small-cells are now the way to complete the 4G-to-5G vision of 100+mbps. WiFi & WiMax are a necessary 'filler' tech with the class 4 MIMO, passport, carrier aggregation, speed needed to provide true 'wireless ultra-broadband' that follows a customer.

3. PootisMan

Posts: 267; Member since: Aug 02, 2013

Sprint sucks period.

5. frmrVZguy

Posts: 42; Member since: Mar 10, 2012

not if you invested at $2 like I did.

2. ajac09

Posts: 1482; Member since: Sep 30, 2009

tmobile should turn around it around and buy sprint haha

1. Zayuh24

Posts: 149; Member since: Nov 21, 2011

The AT&T/T-Mobile merger made sense because of the similar spectrums, network speeds, etc. Both companies would have profited from it, but this Sprint idea is beyond me. It's like they're both trying to shoot each other in the face and flush the evidence.

6. Shatter

Posts: 2036; Member since: May 29, 2013

Sprint would have to spend more money converting everything to CDMA than T-Mobile is worth.

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